Q1

Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $23.50 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers-particularly those located on remote ranches that require considerable travel time. The owner's daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below: Activity Cost Pool Cleaning carpets Travel to jobs Job support Other (organization-sustaining costs and Activity Measure Square feet cleaned (00s) Miles driven Number of jobs Activity for the Year 11,500 hundred square feet 96,000 miles 1,800 jobs idle capacity costs) None Not applicable The total cost of operating the company for the year is $351,000 which includes the following costs Wages Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expense President's compensation Total cost $145,000 23,000 15,000 35,000 61,000 72,000 $351,000 Resource consumption is distributed across the activities as follows Distribution of Resource Consumption Across Activities Cleaning Travel Carpets to Jobs Job Support Other